9911796707
TMI Blog2015 (11) TMI 427X X X X Extracts X X X X X X X X Extracts X X X X ..... have gone up and at the same time percentage consumption of cotton has gone down ; this data also has not been disputed in any manner by the Revenue, the assessee claims that no cotton was purchased from SKS in 2009-10. In this circumstance an alternate plea is advanced that a suitable estimate of disallowance be adopted instead of total disallowance. Reliance is placed on our consolidated order in the case of Anuj Kumar Varshney (supra) ; in this case the addition qua unverifiable purchases of semi-precious stones has been held to be at 15 per cent. of such unverifiable purchases. Looking at the entirety of facts and circumstances, i.e., the books of account being not rejected and consumption of cotton having comparatively decreased, we are inclined to follow our judgment in the case of Anuj Kumar Varshney (2015 (4) TMI 533 - ITAT JAIPUR) and direct to restrict the disallowance to 15 per cent. of purchases from SKS. Thus the assessee's appeals are partly allowed. Claim of interest under section 36(1)(iii) disallowed - Held that:- The assessee had at its disposal sufficient funds available in the form of share capital, reserves and other interest-free funds, etc., which are more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other directors and company. 3. The Revenue has raised common grounds in its both appeal, i.e., I. T. A. Nos. 803 and 804/JP/2014 for the assessment years 2010-11 and 2011-12 are as under : 1. On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) is not justified in deleting the disallowance of interest amounting to ₹ 31,10,640 for the assess ment year 2010-11 and ₹ 26,81,520 for the assessment year 2011-12 made by the Assessing Officer under section 36(1)(iii) of the Income- tax Act. Ground No. 2. of the Revenue is only for the assessment year 2010-11 wherein the Revenue is aggrieved that the learned Commis sioner of Income-tax (Appeals) is not justified by ignoring the fact that the assessee has failed to prove that advances given and investments made in immovable properties are for the purpose of the business of the assessee. 4. The brief facts are the assessee is a public limited company running a hospital under the name and style as Jaipur Hospital situated at Lal Kothi, Tonk Road, Jaipur mainly in the fields of orthopedic and cardiac care. The assessee had filed its returns of income under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment years 2010- 11 and 2011-12 from SKS as unverifiable. The learned Assessing Officer also referred to the statement of one Shri Tara Prakash Sharma, accountant of the assessee-company admitting these purchases as non-genuine. Reliance was made on statement of one Shri Jayant Khandelwal proprietor of SKS who also is alleged to have admitted these facts. Without there being any incriminating material and without verifying the extent of consumption of cotton gauze and merely on the basis of these statements, the entire purchases made from SKS were held as unverifiable and added to income. For an orthopedic and cardiac care hospital consumption of copious quantity of cotton and gauze is undeniable. Without appreciating crucial aspects and merely on the basis of statements the purchases as made from SKS cannot be held as unverifiable and disallowed. If the consumption is viewed on the scale of normal medical practice and compared with the company's own consumption of cotton and gauze in preceding years, it would be found reasonable and comparable. Thus even if a reasonable estimate of consumption of consumables cotton gauze is made, it will leave no room for any disallowance. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d back in cash is completely baseless inasmuch as neither any incriminating material in this behalf nor a rupee of excess cash was found during the course of search. It was explained that consumable expenses claimed in these years were in parity with similar expenses allowed in preceding years when there were no purchases from SKS. Even on the compulsory requirement of consumable material is allowed on an estimate looking at the more number of surgeries, consumption of items like cotton, bandage, gauze etc. is reasonable, thus on the estimate basis also expenditure was allowable. It is common knowledge that in orthopedic treatment and surgery, the use of cotton and bandages is maximum ; a single plaster requires a lot of cotton and a full roll of bandage ; in surgeries and dressings also, abundant consumption of cotton and gauze is a must. The learned Assessing Officer also has not disputed the following relevant details furnished by the assessee : Assessment year Gross receipt Gross profit Gross profit rate Net profit Per cent. Consumption of consumables Per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssure or coercion it is contended that the managing director has disclosed the amounts as disclosed in the statement, therefore, it cannot be held that for part statement there was pressure and for other part there was no pressure. 9. Learned counsel for the assessee contends that statement of Shri Jayant Khandelwal was recorded behind its back, neither copy thereof nor cross- examination was provided consequently this statement has no evidentiary value. 10. Adverting to the Revenue's appeals the learned Commissioner of Income-tax (Departmental representative) contends that the assessee was having following borrowings and liabilities in respective years : Assessment year 2010-11 : Total loan liability of ₹ 8,46,22,663 (vehi cles loan of ₹ 8,69,749 and demand loan from banks of ₹ 8,37,52,914) appearing as secured loans on which total interest of ₹ 89,38,568 was paid by the assessee. Assessment year 2011-12 : Total loan liability of ₹ 9,69,94,357 (vehi cles loan of ₹ 4,94,449 and demand loan from banks of ₹ 9,65,02,908) as secured loans on which total interest of ₹ 98,22,845 was paid by the assessee. Interest so i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 517442 11.5.2009 10,00,000 Axis Bank Ltd. Cheque 517443 21.5.2009 5,00,000 Axis Bank Ltd. Cheque 517444 21.5.2009 5,00,000 Axis Bank Ltd. Cheque 517445 31.5.2009 5,00,000 Axis Bank Ltd. Cheque 517453 7.7.2009 5,00,000 Axis Bank Ltd. Total 3,00,00,000 As per this contract the developer was required to develop a composite project on the property of the appellant located at village Gokulpura at Kalwar Road, Jaipur. The amount of ₹ 3 crores, was to be refunded to the developer after completion of the project. It was further informed that this amount was returned in the assessment year 2013-14 since M/s. Modest Builder failed to complete the project as per this agreement. Given the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. Ltd. 11,90,000 5. Silvering Roadways 6,50,000 6. Sharma Nursing Home and Bome Hos. P. Ltd. 2,69,890 7. Sharma Memorial Hospital Research Institute 3,17,24,035 8. Sharma Memorial Hospital Research Institute 4,46,041 9. Sharma Hospital P. Ltd. 1,33,431 10. Noncurrent investments in quoted/unquoted shares of various companies 31,46,490 11. Noncurrent investments in immovable properties 1,56,84,000 Total 7,22,88,901 13. It is contended that for the assessment year 2010-11, the learned Assessing Officer has treated a sum of ₹ 259.22 lakhs out of total 722.88 lakhs (after reducing the interest-free funds available share capital of ₹ 415.75 lakhs and reserves and surplus of ₹ 47.91 lakhs) as having been made out o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile considering the amount of ₹ 499.73 lakhs as interest-free funds available with the assessee for making concerned advances/investment the learned Assessing Officer has committed a gross error of leaving out/skipping other interest funds available with the assessee to meet out these advances/investments which are grouped under the head current liabilities totalling to ₹ 4,16,91,596, detail of which is as under) : Particulars Amount Sundry creditors for goods and expenses 8,09,377 Advances from patients 16,93,168 Other current liabilities 12,37,820 Outstanding liabilities expenses 68,65,226 Staff security deposit 3,28,931 Modest Builders Ltd. 3,00,00,000 Pharmed Ltd. 25,000 Duties and taxes 7,25,824 Rajendra Sharma 6,250 Total 4,16,91,596 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution, their students were provided to the assessee-hospital. This arrangement is based on a quid pro quo as their services were obtained without incurring any expenditure. Thus the appellant-hospital provided the impugned advances to the trust as a prudent business decision and for economically smooth medical facilities ; this arrangement is clearly commercial and made for the business interests of the assessee. In this regard reliance is placed on the decision of the hon'ble Madras High Court has upheld the aforementioned contentions of the assessee in CIT v. Sambandham Spinning Mills Ltd. reported in [2008] 298 ITR 306 (Mad), wherein addressing to the question of commercial expediency , the court held as under (page 315) : That apart, the case of the assessee was that the advances were given primarily for the reason that the employees of the assessee- company and their family members are being given concessional treatment at SPMM hospital and the said arrangement is a permanent one and all the employees of the assessee-company are benefited by the same. If that be so, it cannot be disputed that the amounts advanced by the assessee are nothing but a measure of commercial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le-Income-tax Act, 1961, s. 36(1)(iii). It is submitted that the observations and conclusion of the learned Commissioner of Income-tax (Appeals) on this issue being well reasoned, based on proper appreciation of facts/details/evidences and in consonance of established principles of law ; they deserve to be upheld. 16. We have heard the rival contentions and perused the material available on record. First we shall take up the assessee's appeals which raise the sole issue of addition on account of unverifiable purchase. The authorities below have relied on the statements of managing director, accountant and proprietor of SKS Shri Jayant Khandelwal. Statement of Shri Khandelwal was neither supplied nor the cross-examination was given to the assessee, consequently the statement of Shri Khandelwal may not be held as reliable evidence against the assessee. However the statements of the managing director and accountant have neither been retracted nor effectively controverted, consequently they remain valid piece of evidence in this behalf. The assessee has endeavoured to demonstrate that the copious consumption of cotton gauze, bandages, etc., has not been disputed ; books of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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